Payment of dividends to a foreign company: income tax

The income tax on dividends must be withheld and paid by the Russian organization, provided that the foreign organization does not have a permanent representative in the country. A permanent representation includes a branch, agency, representative office, bureau, office, branch, any other separate division, or place of business of the company through which the company earns in Russia.

Taxes on dividends for foreign companies

Those individuals and organizations that are not residents of the Russian Federation will be taxed. In both cases, the amount of the fiscal fee is calculated using the following simple formula:

T = DA x TR,

where T is the required indicator — tax;

DA – amount of dividends;

TR is the tax rate, which in general is 15%, that is, the number 0.15 should be substituted into the formula.

What regulations regulate this procedure

When paying income to the participants of the enterprise, it is necessary to be guided by the provisions of Article 284 of the Tax Code of the Russian Federation.  The obligation to pay income tax by foreign companies receiving income from Russian sources is established by Article 246 of the Tax Code of the Russian Federation.

Russia and some other countries have agreements to avoid double taxation.

If the owner of a part of the business has the status of a resident of one of these states, then the tax is calculated in accordance with these agreements. As for dividends to a non-resident legal entity, they must be paid after determining the amount of the organization’s profit.

In order to take advantage of tax benefits, a foreign founder of a Russian organization must provide a tax agent — a person who pays income — with documentary evidence of his permanent residence in the territory of the state with which the Russian Federation has signed the above-mentioned bilateral agreement.

If the tax agent does not receive the necessary documents, the tax on dividends must be paid at the rate of 15%. However, if evidence of the right to exemption is provided, the funds paid to the state budget may be returned (paragraph 2 of Article 312 of the Tax Code of the Russian Federation).

Documentary support

The legislation does not impose special requirements for documenting the procedure for the distribution and payment of dividends, including does not regulate the mandatory set of documents confirming the right to dividends for non-residents. For example, for an LLC, a decision of the general meeting of participants on the distribution of net profit among the participants of the company is sufficient.

In practice, one solution is not enough. It does not contain specific amounts of dividends and calculations of the amounts of taxes withheld at the source of payment. Therefore, along with the decision, additional settlement and payment documents are issued:

Documents required for accrual and payment of dividends:

– accounting certificate-calculation or other primary document to reflect accrued and paid dividends in accounting;

– payment orders for non-cash payment of dividends. If there are many members of the company, then instead of a payment order for the purpose of transferring funds to several recipients of funds, the company can draw up a payment order with a register of recipients;

– an expense cash order, if dividends are issued in cash from the company

Article 9 of the Law of 06.12.2011 No. 402-FZ, Regulation of the Bank of Russia of 29.06.2021 No. 762-P, instruction of the Central Bank of the Russian Federation of 11.03.2014 No. 3210-U

How to pay personal income tax

The tax must be paid to the budget no later than July 15 of the year following the year in which the income was received. You can also do this in the taxpayer’s personal account. For late payment of personal income tax to an individual, penalties will be charged in accordance with Article 75 of the Tax Code of the Russian Federation.

An investor may get confused with the difficulties of filling out a 3-NDFL. If he submits the declaration late or errors are found in it, he faces a fine of 5% of the amount of accrued tax, but not less than 1,000 rubles.